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The sequence of events are Qualification/Pre-Qualification, Pre-Approval, Conditional Approval and Lock.

Pre-Qualification is an opinion that based on your income, assets and current debts that you are qualify for  an unspecific amount of loan based on information that you provided to us. No verification of employment, assets, and no credit report has been pulled. Most likely no AUS (Automatic Underwriting System) has been obtained. It's free and at best, it's a "probably" and in today's market - almost worthless.

Pre-Approval is a conditional commitment by a lender to make a loan before the identification of a specific property. Pre-Approval should have the following components:

  • Let us run your credit. Your rate is predicated on the credit score and it fluctuates daily.
  • Let us know if you change job recently, receive bonus this year or if you've spent all your savings on a new car.  All these items lead to Debt-To-Income (DTI) calculations and can make or break your Pre-Approval.
  • Please provide us with the 2 most recent Tax Returns complete with all schedules and W2s. We will review the DTI if you have Unreimbursed Employee Expenses.   
  • Provide these items as soon as possible.
  • We will obtain AUS approval and address its findings.
  • Pre-Approval letter must specify how long it is valid. 
  • Request for a Fees Worksheet showing itemized closing costs.
  • 30 Day Lock Period may or may not be sufficient. We can do speedy closing for you.
  • Should rates drop after you locked - Inquire if you can renegotiate the rate. Most lenders will charge reneg. fee of .50 basis points.  If after the reneg fee you can still lower the rate without paying extra - then go for it.

Additional steps if you are refinancing:

  • Refinancing - check if your property is under water. You may qualify for a special refinancing program through FNMA or FHLMC up to 125% Loan-To-Value (LTV).
  • Refinancing - HELOC or 2nd Mortgage will require re-subordination and takes time and money to process. Consider that when locking your loan.

Our Pre-Approval consists of all of the above mentioned steps. Thus, guaranteeing the success of your mortgage financing.

Conditional Approval is a commitment by a lender to make a loan. A specific property along with its appraised value is identified and the loan details are spelled out. These include the type and purpose of loan, down payment and type of documentation. It will also include interest rate even though it's rate is not firmly established until it is locked. Approval letters contain "before doc" and "before funding" conditions which are checklists of details that must be completed before the final documents are drawn and before funds are disbursed.

Lock is a commitment by the lender to a specified price rate and points. Usually lenders lock at the borrower's request and view the borrower as being committed as well though they don't always communicate this very well or at all. Since locking imposes a cost on lenders some of them charge a non-refundable fee which may be credited back to the borrower at closing. 

Lock the loan the same day your loan is approved because that is the day when you know the price. Holding off because you expect market interest rates to decline may or may not payoff in this volatile markets. Stay close touch with your loan originator.  

 

 

Posted by Sam Kader on August 31st, 2011 3:49 PM

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